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In truly depressing news, Secretary Treasury Geithner announced he was funneling $2.8 billion more bail-out funds to Bank of America.

In the deal, Fannie and Freddie would agree to abandon claims that they had been sold trash in fraudulent “mortgage backed securities” by the BofA. (A similar deal was provided to Ally Financial.)

As I have written, holders of the securities have gradually realized that the securitizations did not meet the “reps and warranties” asserted by the banks that pooled mortgages.

A growing number of investors have demanded that the originating banks take back the fraudulent securities, including Fannie and Freddie, as well as the NYFed and PIMCO. But true to form, Timmy prefers to backstop the control fraud banks rather than forcing them to bear the costs of their frauds.

The actual losses that Freddie and Fannie will take on the toxic waste sold to them by Countrywide (absorbed by Bank of America, which is now responsible for the put-backs) will undoubtedly be much larger than the $2.8 billion they received in the settlement. And guess who will suffer that extra loss? You betcha: Uncle Sam. As always, Geithner instinctively socializes losses to protect Wall Street's private bonuses.

We know beyond any reasonable doubt that the banks that securitized mortgages committed two types of fraud. First, they stuffed mortgages that did not meet the “reps and warranties” requirements of the PSAs (Pooling and Servicing Agreements), mostly because they were too risky. That is why so many of the securities turned out to be trash with little value.

Second, they did not transfer the mortgages to the Trustees responsible for the securities as required by the PSAs and also by IRS tax laws. Without the mortgages, the “mortgage backed securities” are really unsecured debt. That makes the trash even more toxic. The Trusts cannot foreclose on the property. (That leads of course to a whole separate issue: most and maybe all the on-going foreclosures are fraudulent.) Without ability to foreclose, there is nothing left of value to protect securities holders.

Except that they can put back the securities to the banks. But Timmy has made it clear that he wants the Treasury to take those losses.

More Tarp. Endless bail-outs for Wall Street. The gift that keeps on giving.

This is just the first round—one bank, one fraud, one bail-out, almost $3 billion from Uncle Sam. There were $7.5 trillion of presumably unbacked “mortgage backed securities” put together by the banks. An untold number of those also contain trashy mortgages that do not meet the reps and warranties. And, apparently, none of the securitizations actually moved the mortgages to the Trustees—as required—so all that waste is unsecured debt. Billions here, Trillions there. It adds up.

To be sure, not all of the investors are directly backed by Uncle Sam. But if Geithner is going to intervene to protect the banks, get ready for more hundreds of billions of dollars of bailouts to payoff the investors demanding that banks take back the waste.

Meanwhile, the foreclosure frauds continue, driving homeowners out into the streets. And the administration sits idly by, watching homelessness and joblessness grow toward Great Depression proportions.

What will it take to jumpstart that audacity of hope? Don't look to Washington, which is busy moving more of Wall Street's failures into the administration—including Gene Sperling, Jacob Lew, and William Daley. All disastrous Clinton minions who helped to create the crisis. We should expect no different this time around as they emerge from Wall Street's shadows. Clinton's theme was “Don't stop (thinking about tomorrow)…Yesterday's gone.”

No, unfortunately, it isn't. Back to yesterday's hell, in a handbasket. Our tomorrow will likely look a heck of a lot like Japan's past 20 years as we follow their attempt to ignore reality in a misguided attempt to return to a fictional past.

L. Randall Wray is a Professor of Economics, University of Missouri—Kansas City. A student of Hyman Minsky, his research focuses on monetary and fiscal policy as well as unemployment and job creation. He writes a weekly column for Benzinga every Thursday.

He also blogs at New Economic Perspectives, and is a BrainTruster at New Deal 2.0. He is a senior scholar at the Levy Economics Institute, and has been a visiting professor at the University of Rome (La Sapienza), UNAM (Mexico City), University of Paris (South), and the University of Bologna (Italy).